Forfeiture of a lease owing to a tenant’s breach of covenant is a powerful weapon for a landlord. To avoid forfeiture, a tenant will have to demonstrate that the breach can be, and has been, remedied. In such instances, the distinction between a remediable and an irremediable breach can be critical for the tenant.
Before a landlord can exercise its right to forfeit, it must serve the tenant with a statutory notice detailing the nature of the breach, and, assuming that the breach is capable of remedy, what the tenant should do to remedy it.
Two types of breach are incapable of remedy. The first is illegal or immoral use of the premises, since the stigma attached to such use would supersede the termination of the lease. The second is a breach of a covenant against subletting; a point determined by the Court of Appeal in Scala House Ltd v Forbes [1974] QB 575; (1973) 227 EG 1161. Following that decision, there has been an assumption that an unlawful assignment will also constitute an irremediable breach of covenant.
In Akici v LR Butlin Ltd [2005] EWCA Civ 1296; [2005] 45 EG 168 (CS), however, the Court of Appeal held that breach of a covenant against parting with or sharing possession, that falls short of creating or transferring a legal interest in the premises, is capable of remedy. Significantly, the Court of Appeal said that, in its view, most breaches of covenant by a tenant ought, in principle, to be capable of remedy, on the basis that the landlord is entitled to compensation for the breach.
Although confined by Scala, Neuberger LJ indicated that were he not so bound, he would be sympathetic to the argument that a surrender or assignment back would, in a number of situations, provide a sufficient remedy to the landlord.
Suzanne Dray is a solicitor at Mayer, Brown, Rowe & Maw LLP
Forfeiture of a lease owing to a tenant’s breach of covenant is a powerful weapon for a landlord. To avoid forfeiture, a tenant will have to demonstrate that the breach can be, and has been, remedied. In such instances, the distinction between a remediable and an irremediable breach can be critical for the tenant.
Before a landlord can exercise its right to forfeit, it must serve the tenant with a statutory notice detailing the nature of the breach, and, assuming that the breach is capable of remedy, what the tenant should do to remedy it.
Two types of breach are incapable of remedy. The first is illegal or immoral use of the premises, since the stigma attached to such use would supersede the termination of the lease. The second is a breach of a covenant against subletting; a point determined by the Court of Appeal in Scala House Ltd v Forbes [1974] QB 575; (1973) 227 EG 1161. Following that decision, there has been an assumption that an unlawful assignment will also constitute an irremediable breach of covenant.
In Akici v LR Butlin Ltd [2005] EWCA Civ 1296; [2005] 45 EG 168 (CS), however, the Court of Appeal held that breach of a covenant against parting with or sharing possession, that falls short of creating or transferring a legal interest in the premises, is capable of remedy. Significantly, the Court of Appeal said that, in its view, most breaches of covenant by a tenant ought, in principle, to be capable of remedy, on the basis that the landlord is entitled to compensation for the breach.
Although confined by Scala, Neuberger LJ indicated that were he not so bound, he would be sympathetic to the argument that a surrender or assignment back would, in a number of situations, provide a sufficient remedy to the landlord.
Suzanne Dray is a solicitor at Mayer, Brown, Rowe & Maw LLP
